Macao takes step to curb mainland money laundering

When one walks onto the golden casino floor of Venetian Macao, he is welcomed by the sounds of jangling coins and music from slot machines.

The 50,700-square-meter gaming floor in the Venetian is the largest among 35 casinos in Macao, which tens of millions of mainlanders visit to try their luck each year.

However, besides seeking the excitement of making thousands from a few coins, some rich mainland gamblers are laundering billions of yuan behind the VIP room gates, in luxury jewelry stores or at pawnshops.

That has prompted the Monetary Authority of Macao (AMCM), the city's top financial regulator, to make a drastic move to kill the rapidly growing economic crime.

Recent setbacks

Bloomberg reported on June 9 that the AMCM ordered jewelry shops and pawnshops operating in Macao's casino to remove their UnionPay card terminals by July 1, citing casino operator SJM Holdings CEO Ambrose So.

In a statement e-mailed to the Global Times on Friday, the AMCM said that it "has been taking necessary measures to safeguard the soundness and stability of the financial sector."

"Recently, with an aim to promote healthy development of the sector, AMCM has required banks to further strengthen relevant risk management and ongoing customer due diligence in relation to their card acquiring services," the financial regulator said.

UnionPay has been restricting its cards from being used for gaming since its inception, it added.

On Monday, the Public Security Police Force of Macao said that it will cut the maximum permitted stay from seven to five days for mainlanders in transit in the city from July 1.

Macao, the only place in China where gambling is allowed, posted gaming revenue of 32.35 billion patacas ($4.05 billion) in May on June 3, up 9.3 percent from a year earlier.

Macao's casino revenues surpassed those of Las Vegas in 2007, making it the world's gaming capital. Currently, the city's gaming sector, mostly fed by government officials and business owners from the mainland, is seven times the size of Las Vegas, Reuters reported on March 13.

Unlike Las Vegas, which makes the bulk of its gambling profits from slot machines, Macao gets more than 60 percent of gaming revenues from enormous bets in VIP rooms that mostly cater to mainland officials and businesspeople.

A casino floor manager of Sands Macao Hotel and Venetian Macao told the Global Times on Sunday that jewelry sellers in the resorts' casinos had not received any notifications about the UnionPay terminals removal yet.

"You can buy jewelry with a UnionPay debit card now, but this might not be the case in July or August," said the manager, who declined to be named.

Both a manager of Cartier at Wynn Macao and a manager at Piaget at Venetian told the Global Times Sunday that they had read news about the notification, but had not received it yet. "I strongly suggest mainland visitors apply for a Visa or MasterCard before coming in," said the manager from Cartier, who declined to be named.

UnionPay could not be reached for comment as of press time.

Getting the cash out

China's State Administration of Foreign Exchange and the General Administration of Customs cap the amount of cash that its citizens could take when exiting the country without making a declaration at $5,000, a small number that cannot satisfy mainland gamblers' gaming appetites.

As a way to bypass the restriction, a wealthy mainlander can buy designer jewelry or watches worth millions of yuan with a UnionPay debit card at a local retailer, drop the item as collateral at a nearby pawnshop to get secured loans, and use the cash to gamble. In some cases, the mainland gambler does not even have to get the jewelry or watch in his hands, said Zhang Taowei, a finance professor at Tsinghua University.

"Many gamblers have reached an agreement with jewelry shops and pawnshops before making purchases," Zhang told the Global Times on Sunday. "They just swipe the cards at the retailer on a handheld UnionPay terminal, get the cash at the pawnshop and go straight into the casino."

That method is not only used as a way for gamblers to obtain cash, but also by drug dealers and brothel operators to launder illegal money made in the mainland, he noted.

UnionPay terminals have been entering China at a rapid pace in recent years, allowing the mainland rich to bypass currency control rules.

According to Macao Daily, two mainland men, who had two UnionPay mobile swipe card devices, HK$690,000 ($89,011.58) in cash and HK$500,000 worth of casino chips, were arrested in Macao on May 17. That was the latest move made by the local police to hit UnionPay network-related illegal cross-border transactions.

Impacts on gaming industry

Macau's GDP grew by 12.4 percent in the first quarter of 2014, fueled by a 13 percent increase in the gaming industry, the city's Statistics and Census Service reported on May 30.

Many market watchers, including Zhang from Tsinghua, worry that the AMCM's ban of UnionPay cards could hurt the city's gambling industry and thus its economy.

However, Wang Jianmin, a research fellow of the tourism research center at the Chinese Academy of Social Sciences, told the Global Times on Monday that the impact will be miniscule. That is because the biggest gamers in Macao rarely use UnionPay cards to launder money.

The wealthy mainland people usually borrow, say, 30 million yuan, from the casino, and settle with the casinos with their own companies' accounts or via third-party firms after returning to the mainland, according to Wang.

"They will not likely catch the big fish that way," Wang noted.

A veteran media professional, who said he once frequented Macao casinos with some of the wealthiest businesspeople in Southwest China, told the Global Times on Sunday that the billionaires never use bank cards or cash. "They just go right into the VIP room, and use the money that was made ready for them to gamble," the source, who wished to remain anonymous, said.

The only way to kill money laundering, Wang said, is for the central government to keep cracking down on corruption. "Now it's the central government's responsibility to stop officials from gambling with public funds," he added.

Many casino operators were alerted long before the authorities started taking actions that may hurt the gaming industry, said Candy Tang Mei-fung, an assistant professor of Hospitality and Gaming Management at the University of Macau.

"All parties are developing non-gaming components to attract different kinds of travelers to come to Macao," she told the Global Times on Tuesday in an e-mail. "Most of their new developments focus on entertaining, family-oriented activities or shopping."